Category Archives: All The News That’s Fit To Blog

A few interesting items from around the web.

(1) It is not often that outside directors are forced to contribute to the settlement of a securities class action out of their own pockets. In the Peregrine Systems case in the S.D. of California, however, six outside directors have settled for a total of $55.95 million. AmLaw Litigation Daily has a post on the settlement, but notes that the exact amount being paid by the directors themselves (and whether it is some kind of record) is disputed.

(2) Fox Business reports that the Securities and Exchange Commission has provided a legislative “wishlist” to Congress. Although most of the requests would only have an indirect impact on private securities litigation, the SEC does address the hot button issue of extraterritorial jurisdiction. As stated in the list (No. 15): “Clarify US extraterritorial jurisdiction under antifraud provisions of securities laws, overwriting disparate judicial tests by combining both (effects and conduct). US courts would have jurisdiction over ‘conduct occurring outside the United States that has a foreseeable substantial effect within the United States.'”

(3) The Deseret News reports that U.S. Senator Bob Bennett (R – Utah) has sent a letter to the Securities and Exchange Commission asking the agency to widen its “pay to play” investigation to “include law firms and attorneys who end up selected to file securities class-action lawsuits for pension plans that could bring them millions of dollars in fees.” Thanks to Securities Docket for the link.

The author of The 10b-5 Daily (Lyle Roberts – Dewey & LeBoeuf) will be participating in a Securities Docket webcast entitled “2009 Mid-Year Review: Securities Litigation and Enforcement.”

The webcast is tomorrow (June 9) at 2:00 p.m. ET and there is no cost to attend. The other panelists are Francine McKenna of re: The Auditors, Tom Gorman of SEC Actions, and Kevin LaCroix of The D&O Diary. Register here.

A couple of interesting items from around the web.
(1) Will the government’s role in the credit crisis limit the scope of private litigation? The Blog of the Legal Times has a post on the long-running securities class action against Fannie Mae pending in D.C. federal court. The defendants have asked to court to order mediation, arguing that the plaintiffs have refused “to acknowledge ‘the drastically changed landscape’ following Fannie�s government takeover.”
(2) The 10b-5 Daily was an avid follower of South Korea’s attempts to implement a securities class action system (see here, here, here, and here). As noted when the legislation passed in late 2003, however, the bill imposed significant phase-in and standing requirements that threatened to limit its use. But even a blind squirrel finds a nut once in a while. Securities Docket reports that the first South Korean securities class action is about to go forward.

The New York Law Journal has had two recent columns on securities litigation topics.
(1) In “Revisiting the Limitations Period For Securities Fraud” (June 10 edition), the authors discuss the Supreme Court’s decision to hear the Merck case.
Quote of note: “Doing away with inquiry notice entirely would solve much, if not all, of the existing confusion. However, the Supreme Court’s view of the competing policy issues is likely to inform its decisions regarding whether to keep inquiry notice and, if so, in what form, and whether to impose upon investors an actual duty to investigate and if so, what consequences follow a failure to do so. Reading the tea leaves, the Court is likely to reaffirm that the limitations period commences only after actual or imputed discovery of the facts, and may well formulate broad guidance for inquiry notice that provides an incentive to investigate fraud at an early stage, and imposes a duty to investigate, failing which imputed knowledge would bar claims.”

(2) In “Pay-to-Play Reform: What, How and Why?” (May 21 edition), the author examines alleged abuses in the retention of plaintiffs’ counsel in securities class actions. Among other items, he notes the recent judicial criticism of “portfolio monitoring.”

Quote of note: “Ultimately, the dividing line here probably should be between institutional investors that have an active in-house counsel and those that do not. In the latter case, the law firm effectively controls the client, and thus the problems that the PSLRA sought to end with its lead plaintiff reform resurface again. But when there is a competent house counsel who makes the litigation decisions, the provision of monitoring services should not be viewed as questionable or disqualifying.”

A few interesting items:
(1) What is Judge Sonia Sotomayor’s record in securities class actions? Two notable Second Circuit decisions in which she has participated are Dabit (later unanimously overturned by the Supreme Court) and In re IPO Securities Litigation.

(2) Am Law Litigation Daily reports that the Amsterdam Court of Appeals has approved the proposed Royal Dutch Shell settlement with non-U.S. investors.

(3) The American Lawyer has an article on the lead plaintiff/lead counsel decision in a securities class action brought against Merrill Lynch. The court was highly critical of the “portfolio monitoring” services provided by the lead counsel candidates.

Texas billionaire Sam Wyly has suffered another setback in his long-running battle to obtain documents related to the Computer Associates securities class action. (The 10b-5 Daily has posted about the litigation over the years.)  In a decision issued last week, the New York Court of Appeals found that Wyly, as an “absent” class member in the Computer Associates case, does not enjoy a presumptive right of access to the files held by plaintiffs’ counsel upon the termination of representation. Moreover, in his federal court challenge of the Computer Associates settlement,  Wyly had failed to demonstrate a “legitimate need” for these files and it was appropriate for the state court to defer to the federal court’s determination on this issue.

The New York Law Journal has an article on the decision. In the article, Wyly’s counsel notes that his client’s federal court challenge of the Computer Associates settlement is currently on appeal and Wyly “will pursue the relevant documents there.” Stay tuned.

The big news from late last week was the jury verdict for the plaintiffs in the Household International securities class action. Originally filed in 2002, the complaint alleged that Household engaged in a “massive predatory lending scheme” that led to a $600 million financial restatement. The jury found that the defendants acted at least recklessly as to 16 different statements made to the market, causing Household’s stock price to be artificially inflated. The trial will now move on to the damages phase.

As just the seventh securities class action based on conduct that took place after Dec. 1995 (i.e., after the passage of the PSLRA) to go to a trial verdict, the Household case is getting a lot of attention. Here are some links:

Press: Chicago Tribune (May 8, 2009); Chicago Daily Herald (May 8, 2009)

Blogs: The D&O Diary; AmLaw Litigation Daily; (including a helpful analysis of the jury verdict form).

A few interesting stories from the past week.

(1) From the “Where Are They Now” file, the parties in the Dura Pharmaceuticals securities class action have reached a $14 million settlement. The case included a 2005 U.S. Supreme Court decision on the pleading of loss causation.

(2) At the time of the Milberg Weiss indictment, there was some discussion about whether companies that had previously settled in cases brought by the law firm would bring actions to recover those funds. That has not really happened . . . until now. The American Lawyer has a report on a suit brought by Lakes Entertainment alleging that its 2000 settlement was the product of an improper damages estimate.

(3) One possible indicator of whether securities class actions filings will increase is whether plaintiffs firms are hiring more lawyers. According to an article in The Recorder, that appears to be happening, with an increase in lawyers switching from defense firms.

RiskMetrics has released the SCAS 50, which “lists the top 50 plaintiffs’ law firms ranked by the total dollar amount of final securities class action settlements occurring in 2008 in which the law firm served as lead or co-lead counsel.”

Last year’s leaders:

Total settlements – Coughlin Stoia Geller Rudman & Robbins – 29

Total settlement value – Bernstein Litowitz Berger & Grossmann – $711,950,000

Average settlement value – Grant & Eisenhofer – $108,950,000

The Second Circuit’s recent decision affirming the dismissal of a securities class action against JP Morgan Chase is getting some press attention. The New York Law Journal had two columns this week discussing the case.

In “Circuit Gives Guidance to Litigators on Securities Fraud Claims” (Feb. 23 – subscrip. req’d) and “Clarifying Pleading Requirement for Scienter, Materiality Under PSLRA” (Feb. 25 – subscrip. req’d), the authors focus on the court’s application of SEC Staff Accounting Bulletin 99 as “persuasive authority” on the issue of materiality. Both columns conclude that the decision is helpful for defendants who can demonstrate that their alleged misstatements are quantitatively immaterial.